A Consumable Money. An Elementary Discussion of Commodity Money, Fiat Money and Credit: Part 1

39 Pages Posted: 20 Apr 2004

See all articles by Thomas Quint

Thomas Quint

University of Nevada-Reno, Department of Mathematics

Martin Shubik

Yale University - School of Management; Yale University - Cowles Foundation

Date Written: March 2004

Abstract

In this paper we present a series of models, all within the context of a simple two-good economy, which bring out the distinctions between the different types of money and financial institutions. The models emphasize the physical properties of the economic goods, moneys, and trading systems. Part 1 of the paper covers models in which the money is a consumable storable; the economies in Part 2 use durable money, fiat money, or credit. Under this framework we are able to successfully contrast the role of private money lenders, banks, bilateral credit systems, and credit clearinghouses. We are also able to model the importance of the bankruptcy or default penalty in supporting the use of fiat.

Keywords: Barley, gold, fiat and credit, evolution of money

JEL Classification: C72, E41, E43, E51, E58, K12, P10

Suggested Citation

Quint, Thomas and Shubik, Martin, A Consumable Money. An Elementary Discussion of Commodity Money, Fiat Money and Credit: Part 1 (March 2004). Available at SSRN: https://ssrn.com/abstract=530783

Thomas Quint

University of Nevada-Reno, Department of Mathematics ( email )

1664 North Virginia
Reno, NV 89557
United States
775-784-1366 (Phone)
775-784-6378 (Fax)

Martin Shubik (Contact Author)

Yale University - School of Management ( email )

Box 208200
New Haven, CT 06520-8200
United States

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3694 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://cowles.econ.yale.edu/P/au/d_shubik.htm

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